A defeat in Parliament on income tax cuts could be just what Malcolm Turnbull needs

Malcolm Turnbull and Scott Morrison look like they want a fight over tax cuts more than they want the tax cuts themselves.

The Prime Minister and Treasurer are prepared to take the entire $140 billion tax package to the brink of defeat so they can sharpen the contest with Opposition Leader Bill Shorten at the next election.

Yes, they are serious about the reform. It delivers on the Liberal Party's low-tax message. But they also want to wedge Shorten.

The key question: will they hold out against Senate demands to split the package? So far, the Senate is calling their bluff. Every crossbencher knows from history that the government insists on “the package deal” right up until the moment it buckles.

Turnbull and Morrison will need a compelling message to win this argument but they had a slow start on the first full day of the political campaign.

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Shorten is on the defensive over the citizenship crisis after “guaranteeing” last November that no Labor MPs would have to go to a byelection. The resignation of five of his MPs is a humiliation.

This highlights the emptiness of Shorten’s assurances yet the government did not use this in question time to apply any real pressure. Rather than turn this into a credibility test for the Opposition Leader, the Coalition mostly allowed Labor to focus the argument on company tax cuts instead.

This does not mean Labor had a good day, just that Shorten got off relatively lightly in Parliament.

The decision is whether to vote by June 28, when Parliament rises for its winter break, to legislate the tax cuts so they take effect on pay packets in the new tax year.

Labor, the Greens and most crossbenchers assume the government will cave to demands to split the bill to enact the first year of tax cuts and pause on the rest. There are signs, however, that things will play out differently this time.

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With an election coming later this year or early next year, the government is eager to accuse Shorten of denying tax cuts to low and middle income workers. It can only do so if it escapes blame for taking an “all or nothing” approach.

The government is already losing one part of the argument. Morrison refuses to release the year-by-year cost of the $140 billion package over a decade. He also has no detailed analysis – yet, at least – of the proportion of the tax cuts flowing to the wealthy compared to the poor. This is fundamental to the fairness debate.

Morrison makes a strong argument that workers on higher incomes pay far more tax overall under a tax system that is progressive now and will stay that way under his reform.

A worker on $80,000 a year pays about $18,600 in tax not including any family tax benefits, while a worker on $180,000 a year pays about $58,000 in tax. Naturally, a cut in tax rates makes a bigger difference to someone already paying three times as much tax in dollar terms.

But the government will not win this argument by refusing to release its own numbers while the Grattan Institute, the Australia Institute, the Australian National University and others pick the plan apart.

One scenario is that Turnbull and Morrison refuse to split the bill, suffer a defeat in the Senate and take their plan to the people at the next election.

It looks like exactly what they want. But they will need a better argument on fairness.